Head of Americas
For those losing sleep during this stifling summer over the very real prospect of human extinction, here’s a sliver of good news: Despite numerous attempts, President Donald Trump has laid only a tiny glove on the U.S. low-carbon power and transportation industries thus far.
With just a third of his term left, time and options are running low for a president who continues to deny climate science while serving as the fossil fuel industry’s Cheerleader-in-Chief.
The latest symptom of Trump’s energy/climate policy impotence came July 25 when four major automakers struck a deal with the state of California on fuel efficiency standards for cars and light trucks. Ford, BMW, Volkswagen and Honda promised to cut substantially CO2 emissions from their fleets by the mid-2020s. The pact highlighted the Trump administration’s flawed attempt at promulgating far weaker nationwide standards through its Environmental Protection Agency and its refusal to negotiate in good faith a deal with California over the standards.
The upshot is California will effectively set the rules, not just for itself – but for the entire U.S. and Canada too. Other major automakers are expected to follow in joining the agreement. Faced with the prospect of complying with two conflicting sets of emissions rules in one U.S. market, the manufacturers let California lead the way.
From a climate perspective, this is a major deal. Transportation now accounts for the largest share of U.S. CO2 emissions. Corporate Average Fuel Economy (CAFE) standards finalized under President Barack Obama had the potential to put transport on the same de-carbonization path that U.S. power has followed over the past decade. If automakers would meet Obama CAFE standards in the years ahead, the U.S. might actually meet its economy-wide CO2 cuts promised under the 2015 Paris Agreement. Without them, forget about it.
The California deal is important for two other reasons as well. It highlights the growing importance of U.S. states in dictating policies supporting CO2 reductions (more on this later). While environmental groups note that California actually weakened its earlier standards somewhat to get the four automakers on board, there is little doubt that California Air Resources Board Chair Mary Nichols ultimately trumped Trump by inking the deal.
The other reason is that the agreement marks the latest and biggest setback to Trump’s efforts to defend incumbents in the power and transportation sectors against what he regards as harmful regulations, but what are really just market forces accompanied by ambitious upstart firms exploiting them. The administration may yet have a few energy/climate policy plans up its sleeve before the end of Trump’s term, but its options at this point appear limited. Congress, now half-controlled by Democrats, will be little help. With Trump on the ballot in November 2020 for re-election, time may be running out.
Before elaborating, let me offer a handful of caveats.
First, while Trump’s anti-climate regulatory agenda has been largely ineffective in slowing the clean energy sectors, the fossil fuel industry has hardly suffered as a result (with the exception of the ever-shrinking coal sector). Permian Basin oil and gas production from Texas continues to surge. The U.S. has been the world’s top natural gas producer for a decade, but in 2018 became the top oil producer as well. This has prompted the administration to chest-thump about American “molecules of freedom” being exported to allies in Asia and Europe, thanks to “regulatory relief” pertaining to domestic drilling. In reality, technology development, entrepreneurship, and a spigot of seemingly infinite financing have made the “shale revolution” possible, and the industry has not lacked places to drill. But Trump is hardly the first president to take credit when the U.S. energy security outlook brightens; Obama made similar boasts. Meanwhile, U.S. energy-related CO2 emissions ticked up in 2018 as the economy strengthened.
Second, while Trump’s power and transport sector-focused policies have proven largely benign so far, his efforts around trade have clearly been confusing and disruptive. BNEF has tried to summarize the impact the administration’s tariffs has had to date in various previous research notes, but the exact tally is impossible to calculate as it includes companies’ time plus money spent on lawyers, lobbyists, and all-important energy industry analysts. The White House could yet expand the scope of existing tariffs to cover the outstanding $300 billion of Chinese imports untouched so far – though as of July 31, Trump was signaling he may want to table the entire matter until after the election (client links web | terminal).
Third, just because Trump’s rhetoric around coal and other matters has had little impact on the domestic markets, he has clearly wielded international influence. His withdrawal from Paris has signaled to other global leaders that abdicating responsibility for global warming is just a-okay when done in the national interest.
The next 537 days
Since Trump’s election in November 2016, I have used this space twice to grapple with what his presidency would mean for U.S. climate and energy policies. In the first piece, published two weeks post-election, I speculated Trump’s views might not be as antiquated as they appeared. At the end of the day, Trump was a businessman and thus rationality – about the specter of climate change, about declining solar costs, etc. – could drive his decision-making. Failing that, his cosmopolitan daughter, Ivanka, could talk him out of exiting Paris. I also noted that there were fundamental changes afoot in the energy sector that no president, however well-intentioned or (….er….) otherwise, could impact anyway.
By February 2018, when I returned to the topic here, few doubts remained about Trump’s intentions. His views about climate change, renewables, and coal were apparently set in 1987 and being reinforced daily by Fox News during White House “executive time”. By then, the U.S. was the only major country on Earth no longer in the Paris accord (thanks, Ivanka).
Also by then, Trump’s EPA was in the midst of rolling back the Obama Administration’s Clean Power Plan (CPP) mandating power sector CO2 emissions cuts. His Department of Energy had produced a report on grid reliability that was a precursor to asking the Federal Energy Regulatory Commission (FERC) to assist directly coal-fired generators. His State Department supported construction of the Keystone pipeline.
The true, on-the-ground, net impact of those efforts back then was close to nil. The same could be said today. While derided by conservatives as an over-reach, Obama’s CPP lacked ambition as its goals fell well below what we and other analysts predicted would occur anyway by virtue of gas and renewables being cheap enough to displace coal. DOE’s efforts at FERC were soundly rejected by the commission. As for Keystone, it’s further along than it was but remains ensnared in legal entanglements.
In February 2018, I also noted that the administration seemed generally incapable of actually get things done. EPA Secretary Scott Pruitt and Interior Secretary Ryan Zinke, in particular, lacked political horse sense.
While some of my Washington prognostications have been painfully bad in recent years (Trump will never win!), this one I nailed. When in doubt, always bet on D.C. stasis and incompetence. Zinke and Pruitt both resigned amid scandals in 2018. The administration twice sent budgets to Capitol Hill proposing to decimate funding at EPA and research and development programs at the Department of Energy, only to see them soundly rejected – by Republicans.
Regarding the CAFE standards, Pruitt at the EPA and now his successor Andrew Wheeler have refused to negotiate seriously with California toward an agreement. Instead, they sought to blow up California’s waiver, which allows it to set more stringent standards than the federal government. Caught in the middle were four major automakers who simply sought regulatory certainty and ultimately came to agreement with California. Could Trump have gotten a better deal (weaker standards) had his team been at the negotiating table with the manufacturers and California? We will never know, but the results of not being engaged are now plain to see.
A blue wave crashes into 2019
In November 2018, the political sands shifted bigly for the president. Riding a wave of anti-Trump sentiment, Democrats won back control of the U.S. House of Representatives. Congress had hardly rubber-stamped Trump’s agenda in the first two years of his term, but the next two years would be far more contentious. Legislation aimed at boosting coal-fired power plants or removing tax credits for renewables or electric vehicles would be out of the question.
Democrats’ success in Washington garnered the international headlines. But the party’s more important victories very well may have come at the state level. Democrats won new majorities in six state legislative chambers and had a net gain of seven governorships.
Those results have echoed loudly into 2019. As of July 31, no fewer than six U.S. states have now have binding commitments to make their power fleets 100% powered on clean energy by some future date. The list includes California, Hawaii, New Mexico, New York, Nevada, and Washington State, plus the District of Columbia. Colorado, Maine, and New Jersey have also made important progress on legislation to boost clean energy and cut CO2 emissions. This year may be remembered as the single best one ever in terms of new U.S. state policy support for renewables.
To be clear, not all U.S. states are heading in the same supportive direction for new energy technologies. As my colleague Victoria Cuming described in a research note earlier this year (client links web | terminal), some 29 U.S. states have imposed fees specifically on electric vehicles to compensate for the fact that drivers of such cars pay no gasoline taxes. Nearly every state in the Deep South has a fee in place, despite there being relatively few EVs on the roads there.
Still, the general direction of travel overall has been positive. The Regional Greenhouse Gas Initiative welcomed major emitter New Jersey back into the fold and will include 10 mid-Atlantic and New England states in 2020. Illinois, Pennsylvania, and New York State have all approved bills offering “zero-emission credits” (ZECs) to keep existing nuclear plants afloat.
Things could get even better still for clean energy when voters in my current home state of Virginia head to the polls this November. The state has been electing Democrats to statewide offices for 20 years but Republicans control both legislative chambers by razor-thin margins. Should that change, Virginia could in 2020 adopt for the first time a binding renewable energy standard.
Adding it all up
It could be argued that net-net, the “Trump effect” on U.S. de-carbonization has been neutral. On the one hand, he pursued a slew of policies that would have slowed CO2 cuts. On the other, he generally failed to implement them successfully. Along the way, he proved to be such a divisive character that he galvanized states to take climate matters more into their own hands through unprecedented action.
Netting out both sides of the ledger is close to impossible, but just for argument’s sake, let’s say that in the 2.5 years since Trump took office, the U.S. has essentially run in place when it comes to addressing the climate challenge. In other words, it could have been far worse.
If so, so what? The clock is ticking ever faster and louder on the climate crisis. There is no time for the world’s largest economy and second-largest CO2 emitter to do anything other than make substantial progress. The window to take action is rapidly closing.
In other words, better than bad has definitely not been good enough.